Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Sergio H who wrote (45298)	11/4/2011 7:51:52 PM
From: Spekulatius	1 Recommendation Read Replies (3) \| Respond to of 78627

re NS >>Take a look at their cash flow for specifics. The dividend has been maintained by selling shares and borrowing money.<< IT is a little bit more complicated than that. For MLP's earnings are not as important than the Distributable cash flow. the distributable cash flow is the cash flow - maintanance capex: mlpinvestor.com This is the metric that matters. Since MLP are pass through vehicles and typically don't keep spare cash around, new Capex has to be financed by a combination or new units and debt (typically 50:50 for an MLP with investment grade credit rating). I like NS but i like NSH (the general partner) even more and bought a few shares recently. the general parts get's incentive distribution rights that lever the General partner to growth. the feature i particulary like is that the GP does not get diluted when Lp units are issued, it's a free ride. investopedia.com NSH itself is unlevered and get;'s about 50% from it's cash flow from IDR and the remainder from the ~11.5% stake in NS units it holds. the insider are buying NSH, FWIW: finance.yahoo.com Noth NS and NSH have suffered somewhat from limited growth, which imo is due to 2 reasons: 1) limited Capex after Y2008 to avoid dilution and getting stuck with expensive financing 2) Somewhat ill conceived diversification into Asphalt refining (~20% of DCF) I like however that they have a lot of pipelines that are currently underutilized. Some of those pipelines now get a second lease on life with all those oil shales liquids looking form transportation, so they reverse the flow and brush them up, which is cheaper than building anew. They have some nice projects in the Eagle ford shale going on where they can invest a few hundred million $ yielding 4-6x EBITDA multiples. My guess is that they will issue new NS shares to the amount of 200M$ soon and NSH will get a free ride on the cash flow generated with expansions project that get paid from the capital raised. That is another reason i like NSH better right now.